Many of today's dealers are supplying SOHO with quality

Office World News, Jun 1998 by Ellis, Alicia A

The growth in small business creates the need to supply functional and affordable office furnishings.

The Office of Advocacy for the U.S. Small Business Administration reports that small businesses represent 99.7% of all employers. From 1992 to 1996 over 11.8 million jobs were created by businesses with less than 500 employees. In contrast, companies with more than 500 employees created only 645,000 jobs during that time. Along with small business growth comes the need to supply them with quality products that are functional and affordable. Enter the mid-market Small and entrepreneur businesses often find themselves lacking when it comes to their office furniture. While the product quality of the contract furniture dealers is exceptional, the prices are often out of the SOHO league. When going to the low-end furniture dealers or superstores, prices are low yet the quality, stock and service are not what they want.

Recognizing opportunity, many contract furniture dealers and manufacturers have set their sites on the mid-market not only to fill the need presented by the SOHO market but also to expand their own companies and to increase their profit margins. Manufacturers began introducing new lines of furniture which, in many cases, mirror the quality of high-end contract furniture with wood veneer, designer fabrics and warranties yet are designed to give smaller businesses the functionalitv and quality they wanted with prices they could afford.

"I refer to the mid-market as "invisible business' stated Art Williamson, principal of Office Furniture Strategies, Fairfax, VA and BPIA's mid-market office consultant. "With high-end contract furniture you get a project that is $1 million and everybody knows about it. Everyone is scrambling to be included and have the opportunity to capture a piece of the business. But with the mid-market, you don't have as much attention. The manufacturer or design firm may not even be involved. This enables to dealer to set pr`ke determinations and generate far greater profits." In return for their investment, manufacturers and dealers have been rewarded with an increase in revenues from the mid-market industry. "If you look at the contract furniture high-end business with the gross margins, it is somewhere in the low 20 percentile whereby the mid-market is probably in the mid 30 percentile," stated Williamson. "There is more money to be made in the mid-market." Dennis Insnga, vice president of new markets for BKM Total Office in East Hartford, CT, agrees. Insnga was hired by BKM fifteen months ago to expand BKM's reach to include the mid-market. "Even after such a short time with BKM, business is going extremely well and is expanding." Making the move With entrance into the mid-market come a whole new set of playing rules. They involve a lot more customer communication and support as well as design advice an furniture specifics.

"These businesses have similar needs to the larger businesses but don't have the product knowledge, systems knowledge or the facility knowledge that comes with contract dealers," explained Insgna. "They need support, they need advice, they need help."

Larger contract furniture dealers have facility managers who have the knowledge and the resources to guide large companies as well as work with manufacturers and design teams. Sales representatives for these smaller companies do not have these resources and look to their sales representative for guidance on products' quality, use and price.

"There is a distinction between the furniture that the superstores are offering and that of the midmarket," stated Williamson. "The challenge to the mid-market dealer is to be able to convey to their customers why their products are so much better.

While office furniture dealers once dealt with high-end products in quantities in the thousands and shipment dates are now facing much smaller orders with turn around times from weeks to just a few days. Many times dealers are faced with customer service workers who think that because orders are so much smaller than they are accustomed to that these orders are less important. "Dealers interested in entering the mid-market must understand that it is a different business and turnaround is often time less than 30 days and more often less than that," explained Williamson. "If a dealer wants to grow and sell with a company, they must realize that every customer is as important as the major corporations. There is a great black hole for orders to get lost and someone need to shepherd these customers. These are the customers that have the potential to grow and become major contract dealers in the future." The future is ours More large contract office dealers are getting into the mid-market than ever. When the mid-market was in its infancy, the selection and quality of the products offered paled in comparison to today's products.

"Today, the products are an absolute legitimate value and the variety of choices are equal to or approaching what the contract end offers," declared Williamson.